Saturday, July 17, 2010

The standing obelisk in this photo is about 100 feet high, and is visible for 50 miles. It was erected about 3,500 years ago, and stands today in the Temple of Karnack in Luxor, Eqypt. It is made of a solid piece of granite that was quarried a few hundred miles from the temple. It is almost 100 feet high and weighs about 300 tons (almost two-thirds of a million pounds). Today, it still stands almost vertically without the help of rebar or cement. How it was carved out of a mountainside and transported over hundreds of miles thousands of years ago and raised to a vertical position is beyond my power of comprehension.

Amazing indeed, given the amount of resources that it would have taken in a primitive society to quarry, move, and erect that obelisk. What's also remarkable, in my opinion, is the ruthless despotism that would have been required to extract those resources from the private populace.

Bill: while on the Nile cruise, I was connecting to the internet via the ship's onboard WiFi. I assume the ship was connected to the internet via a 3G cellular connection, but I don't know for sure. Cell coverage was pretty good nearly everywhere.

[I recognize this post is out of context with this thread. Since NIPA profits are a key metric watched in this group, this alt-view seemed meaningful. Didn’t know where else to post it.]

It is frustrating and at the same time interesting that so many very smart analysts have completely polar views – not just with speculated outcomes, but of the characteristics of the supporting data itself.

Are NIPA profits "less volatile or frequently revised", "leading or lagging", “indicating overvalued or undervalued stocks”? I very much appreciate both these analysts take, but I dunno. Add to that hyper-sensitive program trading, media driven volatility - maybe factual analysis matters less than behavioral analysis anyway. Good luck with that, right.

Scott Grannis:

http://tinyurl.com/284h78k

"Lots of pessimism in those figures, as I think you can see from the second chart, which compares profits according to the NIPA calculations (which in turn are based on IRS data), and standard earnings calculations based on what companies report using GAAP and write-offs. I note that the NIPA measure of profits is much less volatile than the S&P measure, and to my eye the NIPA series tends to lead the S&P series. NIPA profits are just a shade below their all-time high (as of last March), while S&P profits are still almost 25% below their all-time high. If the NIPA series is indeed a leading indicator of reported profits, then there is plenty of good news on the profits front to come."

John Hussman:

http://www.hussman.net/wmc/wmc100719.htm

"In short, the NIPA profit estimate is a frequently revised, noise-ridden, extrapolation-based quarterly data point, reported with a substantial lag, that excludes a host of shareholder-relevant expenses, and covers a broadly different universe of companies than does the S&P 500. So I've been asking myself, why would anyone want to use NIPA profits to value the market, instead of using actual earnings reports, or even forward operating earnings which are already a sufficiently overblown measure of corporate performance? The only answer I can come up with is that NIPA profits are an even more overblown and misleading measure, allowing the continued assertion that stocks are undervalued."